Luxury travel soars as middle-class struggles

[WORLD] The era of "revenge travel" appears to be winding down. After a surge in travel from 2022 to 2024, fueled by pent-up demand from pandemic-era lockdowns, American travelers are beginning to pull back. A mix of economic headwinds — from persistent inflation to looming tariff threats — has cast a shadow over summer travel plans.

According to a Bankrate survey conducted in March, just 53% of Americans say they intend to take a vacation this summer, unchanged from last year but down significantly from 63% in 2023. Of those opting to stay home, 65% point to cost as the primary reason. Among those still heading out, nearly one in three say they expect to incur debt to fund their trips.

It’s not just higher prices at play. Interest rate hikes by the Federal Reserve have made borrowing more expensive, further discouraging would-be vacationers, especially those who rely on credit. The result: a more restrained approach to travel, particularly among middle- and lower-income Americans.

Yet the pain isn't evenly distributed. A Deloitte survey conducted in early April — shortly after President Donald Trump’s sweeping tariff announcement — found that projected summer travel budgets remained 13% higher than last year’s estimates. The data also highlights a shifting demographic: nearly half of those planning to travel this summer reported incomes above $100,000, up from 35% the year before.

That shift is reflected in the travel industry, where luxury continues to outpace other segments. As middle-income travelers scale back, the wealthiest vacationers are doubling down on high-end experiences. Private jet charters, luxury yacht rentals, and bespoke itineraries are gaining traction, catering to affluent customers willing to pay a premium for exclusivity. The rising demand for such services is inflating prices and widening the gap between budget and luxury travel.

Meanwhile, signs of contraction are surfacing in destinations reliant on more modest travelers. Las Vegas, a city long favored by the middle class, is experiencing a notable downturn. Mark Wayman, an executive recruiter familiar with the Vegas market, says bookings through September are "the worst I've ever seen."

Years of price increases are weighing on consumers. Many travelers report that airfares and hotel stays now come with fewer bundled services. Southwest Airlines, for example, made headlines in March by ending its longstanding two-free-checked-bags policy. “It just feels like your money doesn’t stretch as far,” one traveler said.

At the same time, shifting consumer habits are reshaping travel patterns. The rise of remote work has given way to “workations,” where travelers blend business and leisure by staying longer in more affordable locations. Cities like Austin, Texas, and Asheville, North Carolina, have emerged as hotspots for remote workers chasing that balance.

For Reycie Gallardo, a 39-year-old IT project manager in Los Angeles, the changes have altered how he and his wife vacation. Where they once flew to national parks for extended weekends, they now opt for day trips to nearby destinations like Santa Barbara — often without booking an overnight stay.

That frugality is echoed by Makarand Mody, associate professor at Boston University's School of Hospitality Administration. Deloitte's April survey found that nearly 25% of respondents had chosen to drive rather than fly in the past year due to high prices. More affordable lodging — from RVs to campgrounds and bed-and-breakfasts — is also in higher demand among cost-conscious travelers.

Environmental concerns are contributing to the shift as well. Sustainable travel options — including carbon-neutral flights and solar-powered lodges — are gaining traction among consumers looking to reduce their footprint while saving money.

For Talon Windwalker, a 56-year-old grief counselor from Janesville, Wisconsin, driving has become a necessary concession. On a recent road trip to South Carolina, his 50th state visited, he spent four of his seven vacation days behind the wheel. “You make a lot of sacrifices,” he said.

Home-swapping is another trend on the rise. Platforms like HomeExchange and Kindred offer more affordable, community-based alternatives to hotels and vacation rentals. HomeExchange facilitated 43% more swaps in 2024 than the year before, while Kindred — launched in 2021 — saw a more than 500% surge in nights exchanged over the same period.

This growing interest in home-exchange reflects travelers’ search for value and authenticity. As hotels grow pricier, many Americans are opting for cost-effective options that provide a more local experience.

Still, the travel sector isn’t suffering across the board. Mody notes that airlines, hotels, and rental platforms are seeing “some pretty healthy bottom lines.” Rising prices mean companies can maintain revenue even as demand softens — and high-income consumers are more than picking up the slack. A recent analysis by Moody’s found that the top 10% of households now account for half of all consumer spending.

The result is a robust luxury travel market. The American Hotel & Lodging Association’s 2024 report revealed that the luxury segment is growing faster than any other in terms of new hotel construction. Bram Gallagher, head of economics at AirDNA, said demand for short-term rentals priced over $1,000 per night has more than doubled since 2019, with bookings in the $1,000–$1,499 range up nearly 15% year-over-year.

Gallagher also points to a growing divide: prices for luxury rentals are climbing much faster than those for budget listings. Between February 2024 and February 2025, average prices for the top 20% of listings rose by over 5%, while the least expensive 20% actually saw a slight decline. Recent growth in the short-term rental market, he says, is largely driven by these high-end stays.

That divergence is widening a gap in the travel landscape. “There’s no indication that luxury travel is slowing down,” says Roy Madhok, a senior vice president at hospitality firm Highgate. But for middle-income Americans, the rising cost of travel is becoming harder to bear.

Still, there may be a silver lining. Madhok views the slowdown not as a collapse, but a correction. “The recent travel boom wasn’t normal or sustainable,” he said. With demand softening, prices are beginning to stabilize. Wayman noted that after years of steep hikes, costs in Las Vegas for hotels, dining, and entertainment are starting to drop.

Data from the U.S. Bureau of Labor Statistics supports this trend. Airfares in 2025 have remained in line with 2024 prices — and similar to those in 2019. Hotel rates are slightly down compared to last year, though still above pre-pandemic levels. The American Hotel & Lodging Association’s latest report described the hotel industry’s performance as “stagnant,” signaling a return to more typical travel conditions.

Despite the affordability crunch, Americans’ desire to travel hasn’t disappeared. Mody sees an opportunity for brands to cater to middle-tier consumers who still want to get away. Major hotel chains like Hyatt, Hilton, and Marriott have already announced new midscale brands aimed at this market.

But whether those efforts will close the gap remains uncertain. “The travel economy reflects the broader economy,” Mody said. And with wealth inequality continuing to grow, the most opulent travel experiences are drifting ever further out of reach for most Americans.